Home' Nufarm Annual Report : Nufarm Annual Report 2015 Contents Long term incentive plan (LTIP)
Why have an LTIP?
This plan aligns executive interests and earnings with the longer term Nufarm strategy
and the interests of shareholders.
Who participates in the LTIP? The current participants in the plan are disclosed executives and other selected senior
managers (together, the LTIP participants).
Are the awards cash
The plan rules provide the flexibility to use a number of different instruments provided they
comply with local regulations and sound practice. FY12 and FY13 awards were granted to
executives in the form of share rights, which comprise rights to acquire ordinary shares in the
company for nil consideration, subject to the achievement of global performance hurdles.
From FY14, rights allocations have been indeterminate. At the time of vesting the board
will determine if the rights convert to ordinary shares or cash or other instruments that
may be in use at the time.
When are the awards made? Under the plan, LTIP participants receive an annual award of rights as soon as practical
after the announcement of results for the preceding year.
How is the number
of rights calculated?
The number of rights to be granted is calculated by dividing the individual’s LTI grant
opportunity for the performance year by the volume weighted average price (VWAP)
of the company’s shares over the five trading days immediately following the prior year’s
annual results announcement.
When do the awards vest? The performance/vesting period for awards is three years. Awards will vest in two equal
tranches as follows:
• 50% of the LTIP grant will vest subject to the achievement of a relative TSR performance
hurdle measured against a selected comparator group of companies; and
• the remaining 50% of the LTIP grant will vest subject to the three-year average of an
absolute ROFE target.
Why have ROFE and
relative TSR been
chosen as the hurdles?
ROFE is used to track progress towards the goal to return long term results back to
acceptable levels for Nufarm. Strong relative TSR performance ensures Nufarm is an
attractive investment for shareholders.
What is the comparator
group for the assessment
of relative TSR?
Based on the results of research and modelling carried out by Ernst & Young, at the
inception of the plan the board approved the adoption of the ‘S&P ASX 200 excluding
those companies in the financial, materials and energy groups’ as the TSR comparator
group. This provides a group that is large enough for sound measurement with exclusions
that reduce the volatility by removing companies that are in significantly different industries
to Nufarm. Commencing from FY16, the board approved the inclusion of Dulux (DLX),
Incitec Pivot (IPL) and Orica (ORI) on the basis of their similarity as chemical companies
even though they appear in the materials index. The TSR comparator group is also seen
as an appropriate representation of Nufarm’s competitors for investment.
How is relative TSR
TSR will be measured over the performance period. For the purposes of this measurement,
each company’s share price will be measured using the average price over 60 days up to
(but excluding) the first day of the performance period, and the average closing price over
60 days up to and including the last day of the performance period.
What is the relative TSR
TSR of Nufarm relative to the TSR of
comparator group companies
Proportion of TSR grant vesting
Less than 50th percentile
Between 51st percentile and 75th percentile Straight-line vesting between 50% and 100%
How is the ROFE target set? ROFE objectives are set by the board at the beginning of each year. There is both a
‘target’ and a ‘stretch’ hurdle. These numbers are based on the budget and growth strategy.
‘Target’ represents a sustainable return to acceptable ROFE levels. Stretch recognises
achievement well above budget. This ensures that full vesting of the LTIP is truly reliant
on outstanding performance.
How is ROFE measured?
Return is calculated on the group’s earnings before interest and taxation and adjusted
for any material items. Funds employed are represented by shareholders’ funds plus total
interest bearing debt. For the purposes of measuring ROFE performance in the LTIP, ROFE
will be averaged over the life of the plan.
DIRECTORS’ REPORT continued
NUFARM LIMITED ANNUAL REPORT 2015 | 47
Links Archive Nufarm Half Year Report 2015 Nufarm Sustainability Report 2015 Navigation Previous Page Next Page